Sampo Group Analyst Day - Invitation

Tuesday, August 25th, 2009

Sundmans, Eteläranta 16, 00130 Helsinki

Programme of the Day

13.00 – 13.45 Buffet lunch 13.45 – 14.00 Welcome Group CEO and President Kari Stadigh 14.00 – 14.30 Value creation through IT

Kjell-Rune Tveita, Chief Information Officer, If P&C

14.30 – 15.00 Internet in If P&C Line Hestvik, Head of BA Private, If P&C

15.00 – 15.30 Coffee 15.30 – 16.00 If’s reinsurance strategy Knut-Arne Alsaker, Head of Reinsurance, If P&C 16.00 – How Sampo manages risks Markku Pehkonen, Chief Risk Officer, Sampo Group 17.00 - Boat leaves for Repossaari

Please register

with Ms. Taina Vesalainen, taina.vesalainen@sampo.fi, tel. +358 10 516 0033

by Tuesday, 18 August 2009.

Welcome!

Value of IT

Kjell Rune TveitaCIO If P&C Insurance

2

Agenda

Introduction to If’s IT organization

Key ongoing projects

Future priorities

3

Our people

4

Nordic organization with strong connection to business operations

CIOKjell Rune Tveita

IT SERVICES

CORPORATE SYSTEMS

DATA WAREHOUSE

IT CONTROLLING & SECURITY

Process & TechnologyPRIVATE

Process & Technology

COMMERCIAL

Process & Technology

INDUSTRIAL

Process & Technology

BALT. & RUS

If BUSINESS AREAS

Organizational priorities

— Delivery of excellence

— Stability

— Cost efficiency

— Innovation

— Business relationships

Balance between centralized setup and close integration with business operations

5

Cornerstones in governance model

— If’s project management model

— ITIL common language

— Common system development and maintenance standard

6

Continuous improvements in service and efficiency

Efficient operations

* Cost including IT operational costs within BA industrial, commercial and private** Gartner, IT key metrics data 2009

Operational cost developmentMillion SEK*

- 11%

Relative performanceIT spend as % of revenue**, 2008

If

Banking & finance

4,3%

6,9%

Extensive development efforts

Development costsIf group, Million SEK

— Realization of common Nordic insurance system

— Implemented in BA Industrial

— Ongoing implementation in BA Commercial

— Launch of If Login

— Implementation of Nordic payment system

— Ongoing roll-out of Nordic internet platform

— Ongoing implementation of Automated Claims

2004 2008

720 640

190 220320 370

420

2004 2005 2006 2007 2008

7

Agenda

Introduction to If’s IT operations

Key ongoing projects

Next steps

8

IT an integrated component in If’s strategy

Customer focus

Operational excellence

Selective growth

Internet site makeover

Waypoint

Automated claims

Russia & Baltic integration

Key ongoing IT projects

9

Key ongoing internet projects

External website makeover Development of Nordic sale functionality

10

New product system platform being introduced within BA Commercial

Scope

Implementation plan

Preliminary

20072008

2009

2010

2011

Sweden

Completed

Norway

Ongoing

Denmark

Finland

2012

Nordic insurance system for commercial customers

Handling of policies, claims and customer information

Project description

Benefits

Improved process efficiency and quality

Better tariffs and intelligent pricing

Reduced IT costs

New products, and time to market

11

Improvements in customer service and efficiency through Automated Claims

6700

4300

2009Jan-May

2008

Number of registrations

69%

50%

Automation level (processed inquires)

4000

2009Jan-May

2008

69%

61%

10 500

12

Ongoing projects in Baltic countries and Russia

Baltic countries

Russia

Implementation of Nordic systems and agreements in newly acquired SOAO Region

Launch of system for tariff corporate products

Investigation of potential claims handling via partners

Integration of SOAO Region and “If insurance Russia” IT platforms

Launch of Letakpasam.lv and Drauskpats.lt

Implementation of one Baltic system for private and corporate

13

Agenda

Introduction to If’s IT organization

Key ongoing projects

Future priorities

14

Future priorities

Implementation of Nordic customer contact center

Continued automation efforts

Internet initiatives with focus on service concepts

Next wave in off shoring/outsourcing

Keep cost advantage

Internet

Sampo Analyst DayAugust 25, 2009

2

We aim at creating value through Internet within sales, service and claims

www.if.se/fi/no/dk

Claims

Service

Sales

We handle about 1 000 000 claims per year

We have about 3 000 000 customers

Under development, with first release projected for Finland

Launched in Finland, Sweden and Denmark with Norway being next in line

Internet registration launched in all countries. Further work process improvements planned.

3

4

Marketing messages

On-line Support

Shopping basket

The sales process

5

The claims process

6

Internet sales has increased, although starting from a low level

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

2003 2004 2005 2006 2007 2008 2009F

Automated sales on the Internet, no. of objects Finland

Sweden

Norway

7

Internet sales was launched in Denmark in June 2009

Motor

Property

Person

Automated sales on the Internet in Denmark, no of objects

0

50

100

150

200

250

300

350

400

Jan Feb Mar Apr May Jun Jul

8

The share of claims reported online is continuously growing

47%

70%

61%

13%

20%

12%9%

24%

44%

29%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Sw eden Norw ay Denmark Finland Total

Growth rate in and share of claims reported on Internet per country, 12 months rolling

Growth rate, 12 months rolling per June 2009 compared to June 2008

Share, 12 months rolling per June 2009

9

Given differing market dynamics, we follow country-by-country strategic directions for Internet

Based on market dynamics, we don't actively push Internet in Norway.

Given our challenger position in the Danish market, there is a potential for growth.

In Finland, we actively “push”our Internet solution.

In Sweden, we actively “push” our Internet solution.

We actively market our Internet solution in the Nordic market. Yearly marketing spend of 50 MSEK.

10

In addition to our website and standard offers, we work through partnerships with online classifieds to target the used car market

Used car warranty and Try-On offer for car insurance

Used car warranty and Try-On offer for car insurance

Car insurance offer with exact quote to logged-in members

Discounted car insurance offer

Sales so far: 60 000 objects

Sales so far: 3 000 objectsLaunch September 1st Sales so far: 200 objects

Reinsurance Strategy

Knut Arne AlsakerHead of Reinsurance

2

Main reasons for If to buy reinsurance

– Utilize the capital base efficiently

– Reduce cost of capital

– Limit large fluctuations in underwriting results

– Increase underwriting capacity

– Get access to reinsurers’ competence base

3

Reinsurance is a key risk and capital management tool

Before reinsurance

ERM/Corp. Finance Perspective

Traditional

Strategicand

tactical

After reinsurance

Operational

Credit

Market

Insurance

Liability side adjustment

Subordinated debt

Equity

Operational

Credit

Market

Insurance

Equity

Subordinated debt

ReinsuranceLiability side adjustment

OperationalCredit

Market

Insurance

Equity

Liability side adjustment

Economic Capital

Reinsurance

Subordinated debt

Diversification

4

View of reinsurance from a risk perspective

Probability of event/risk

Fina

ncia

l effe

ct o

f eve

nt/ri

sk

Handled without reinsurance

Stabilizing reinsurance

Basic reinsurance

Noreins.

Illustrative

5

200Retention200 MSEK

200

5 000

Retention200 MSEK

100

Property Per Risk1.4.2009 - 31.3.2010

Per Event1.1.2009 – 31.12.2009

Casualty1.6.2009 - 30.5.2010

Retention 100 MSEK

Fac. XL

500

Fac. XL

Portfolio without US manuf. risksprotected by thistreaty Section

Portfolio withUS manuf. risks protected by thistreaty Section

Q 2 / 2009

QRISQuarterly Reinsurance Solution

150 MSEK xs 50 MSEKxs QAD

Retention50 MSEK

200

50

QRIS & ARISCorporate Multi-lineProtection

1.4.2009 - 31.3.2010

ARISAnnual Reinsurance Solution protecting accumulated QAD

150 MSEK xs 50 MSEKxs AD 500 MSEK

2 000

Q 3 / 2009

Q 4 / 2009

Q 1 / 2010

If’s largest reinsurance treaties currently in force

6

If’s total reinsurance program consist of three elements

Facultativereinsurance

Core treaties-

Excess of loss

QRISPrimarily focused on profit volatility and stabilizing effects on the P&L

Reduce risk exposure and net effect of multiple medium-sized claims

Structured to reduce fluctuations both in quarterly and annual results

Large (peak/unusual) individual risks

Provide capacity above what is provided by core treaty programs

Provide risk capacity above If’s risk tolerance and protect balance sheet

Capture risk related to large event (typical nat cat) and single large risk exposures

Designed to significantly reduce tail risk, typically use of non-proportional reinsurance

Structured in terms of capacity and retention based on cost of reinsurance vs. cost of capital and generally If's risk tolerance at a consolidated level

7

0,7 0,8 0,9 1 1,1 1,2 1,3 1,4

Gross Net

0

1

2

3

4

5

6

7

0,3 0,5 0,7 0,9 1,1 1,3 1,5 1,7

Total Denmark

Sweden Norway

Finland

Use of non-proportional reinsurance to reduce risk for a well-diversified P&C insurer

Private

Commercial

Industrial

Russia &Baltics

NorwaySwedenFinlandDenmarkLithuaniaLatviaEstoniaRussia

Motor TPL

Motor Other

Property

PersonalAccidentLiability

WorkerscompensationCargo

Seg

men

tsG

eogr

aphy

Pro

duct

s

– Substantial diversification effects

– But risk profile affected by large exposures and cat risk

– Reinsurance strategy adapted to business model to support key financial targets

– Excess-of-loss reinsurance very effective for reducing tail risk

– Significant reduction in capital need

1,1 1,2 1,3

8

1 in 4 1 in 4

1 in 20 1 in 20

1 in 100

1 in 100

1 in 200

1 in 200

Gross Net

Gross Net1 in 100 -4 075 -8821 in 200 -5 462 -1 120

XL reinsurance reduces the capital need significantly

Source: Guy Carpenter & If’s internal Risk Management

Cost of capital decreased by 759 MSEK at 200 years level and 17.5% RoE

Effect of cat XL-program

Cost of reinsurance

Cost of capital

Economic value

vs.

9

A group-wide catastrophe program has proven valuable towards Nordic storms

0

100

200

300

400

500

600

700

800

900

Gross Net Net, localretention 100

Net, localretention 50

BalticsFinlandDenmarkNorwaySweden

Losses, gross and net given If's

reinsurance structure

Assessment if local programs with retention 100/

50MSEK

Figures similar to the Nordic storm "Gudrun" (2005)

Figures represent gross/net losses, excluding reinstatement premiums

10

Summary of the iterative process to structure the total reinsurance program

Assess Business

Area’s capacity needs

Access reinsurance market, negotiate

pricing, secure quality reinsurance panel

Optimize retention levels

from a risk/return perspective (given RoE

target)

Evaluate effect of

reinsurance structures on profit volatility

Secure compliance

requirements (internal & external)

Assess needed reinsurance

capacity given risk tolerance

11

70,0

75,0

80,0

85,0

90,0

95,0

100,0

2005 2006 2007 2008 2009 2009-6

AAA

AA+

AA

AA-

A+

A

A-

If’s reinsurance panel S&P rating development according to Aon’s Rating Index Weighted by EPI

If’s reinsurance security policy requirements:

Short-tailed lines: A

Long-tailed lines: AA

12

Governance of reinsurance in If

Risk Management

Business Areas

Group Reinsurance

Market perspectivePricing / negotiation & placement

Security ManagementAdministration

Capacity requirementsFinancial plan

Business opportunities

Capital requirementsCost of capital

Analyses & optimization

Board of Directors

Risk control Committee(CEO, Deputy CEO, CLO, CFO, CRO, Chief Actuary)

Reinsurance Committee(Head of Reins., Heads of UW, CRO, Chief Actuary)

Risk Management in Sampo Group

From Risk Measurement to Risk Management

August 25th, 2009 2

Risk is our Business

• For financial sector companies in general, the core competences in business are – skilful pricing of risks,– proper management of risk-exposures arising

• High quality Risk Management Process is prerequisite of business

• How Sampo views Risk Management ?

August 25th, 2009 3

Risk Management is a Process GOVERNANCE

• Risk Governance; – Authorisations and responsibilities of centralized units and administrative bodies are

clearly defined and delegated

• Clear division of business responsibilities:– Strategies of different companies and business areas are clearly set,=> Concentration risks managed centrally

ANALYSIS

• Identification and measurement of Risks:– The risks involved in business operations and business environment are analysed and

measured continuously– Especially when launching new products risks are thoroughly analysed.

• Determining Risk Buffers required – Difference between actual capitalisation and internally assessed Capital requirement

(“Economic Capital”) is monitored regularly

August 25th, 2009 4

Risk Management is a Process ACTIONS

• Pricing of Risks: – Sound pricing of customer transactions taking into account (i) allocated capital and its

return target, and (ii) operating costs– Balance between Return and Risk in investments

• Managing Risk Exposures & Capitalisation:– Investments, liabilities and capitalisation, are constantly adjusted to maintain a sound risk-

return ratio and return on capital (ROC)– Portfolio management’s responsibilities are based on defined limits and respective

authorisations– In strategic divestments/investments risk-return plays a significant role

CONTROL

• Internal Audit– Internal and external rules followed

• Measuring and reporting of Risks:– Results, risks and profitability are measured and reported by units, which are independent

from business activities

August 25th, 2009 5

Different Angles to RMPMeasurement & Control

• Focus on Measurement, strong confidence in results • ”Too” independent Risk Management Unit does not understand business well enough, • RMU concentrates on controlling businesses and their risks • Capitalization is a major risk management tool

Management & Actions

• Focus on understanding the earnings logics. Measurement is seen as a tool helping to understand earnings logic even better,

• Risk management unit is independent, but in as close co-operation with businesses as possible• RMU controls risks, but at the same time consults management and business units in risk

issues • Capitalization is important, but adjusting risks pro-actively is even more important

The active management of risks based on good understanding of expected returns and risks is the key

Sampo prefers Management over Measurement

August 25th, 2009 6

RMP and Investment Management• Company specific needs form the basis for all investments

– Liabilities intensively analysed and modelled– Regulatory requirements

• Strategy– Absolute Return targets taking into account the liabilities and general business targets– No diversification for the sake of diversification

• Centrally managed activities– Investment strategies coordinated and streamlined, no overlapping activities– Sampo plc’s Chief Investment Officer responsible for all investments, all portfolio

managers have a direct reporting line to him– Common infrastructure for investment administration and reporting

August 25th, 2009 7

RMP and Capital ManagementRisk Capital Available > Risk Capital needed

– Risk Capital Available = SI Capital + other items absorbing economic losses– Risk Capital Need = Measured Economic Capital + ”Non-measurable” risks– The buffer between above measures under constant considerations and

risks/capitalization are changed pro-actively

Economic Capital (EC) at 99.5% confidence level as a basis for Risk Capital Need– Economic capital is an estimate of Risk Capital required to keep the Group solvent within

1 year time frame with given volatilities and correlations– EC is calculated at 99.5% confidence level and 1 year risk horizon– ”Non-measurable” risks - considered by management- are for instance liquidity, market

illiquidity and risks related to business environment

Adjusted Solvency Capital is our measure of Risk Capital Available– Solvency I capital items included as such– The difference between undiscounted technical provisions and their discounted value plus

optionalities (Liability side adjustment)– Capital instruments excluded from regulatory capital in Solvency I

August 25th, 2009 8

Sampo Group EC, 30 June 2009According to Solvency II (Nordea 18.19% consolidated)

1,062

3,827

5,452

397

379350

2,480

682

379118

0

1,500

3,000

4,500

6,000

7,500

P&C Life Holding Diversif. GroupEconomic

Capital

Adj. GroupSolv. Capital

Liability side adjustments,If and Mandatum Life

EURm

ExcesscapitalEUR 2.9 bn

Equalisation reserves

6,678If subordinated loan

August 25th, 2009 9

Sampo Group and OP-Pohjola GroupSolvency 30.6.2009

Sampo Group OP-PohjolaEURm Consolidation Method *) Group

Group Capital 6 090,1 5 682Sectoral items 872,8 1 683Intangibles and other deductibles -1 511,0 - 2 179

Goodwill -1 033,5 - 1 100Equalisation reserve -382,7 -500Other -94,9 -579

Solvency capital, total 5 451,8 5 186Minimum requirement for solvency 3 297,7 3 580Group solvency 2 154,1 1 606Group solvency ratio,% 165,3% 145%

*) Nordea 18.19% consolidated

August 25th, 2009 10

Monitoring Risks and Capitalisation at Group Level

-100

-50

0

50

100

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

Risksover time

Capital components• Capital items• Profitability

Risk exposures by asset & liability classes

Risks by exposures• Known rules vs. scenarios

Total Risk as EC• Known rules vs. scenarios

• Earnings risks vs. Consequential risks

Risk Buffersover time

• Risks vs. Buffers• CRO´s analysis• Internal Audit's comments• S&P/Moody's Opinions• Regulators view

MajorManagement Actions

• Investment profiles• Liability profiles• Capital decisions

Independent Analysis

Audit Committee is able to make recommendations

0

20

40

60

80

100

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

East

Risk Management in Sampo Group

From Risk Measurement to Risk Management